Guest Scrappy Posted July 8, 2005 Posted July 8, 2005 This is a profit sharing plan with self directed investments. A participant, who is highly compensated, invests part of his plan account balance in a real estate limited partnership. He owns 29% of the real estate limited partnership. I think it is a prohibited transaction. Any other thoughts?
Blinky the 3-eyed Fish Posted July 8, 2005 Posted July 8, 2005 Why do you think so? There is not enough information for anyone else to make a determination. Read 4975(e) and determine if this person is a disqualified person if you want others to chime in. Actually, I should amend my comment to ask what you mean when you say this person is an HCE. Under what definition? "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
Ron Snyder Posted July 9, 2005 Posted July 9, 2005 Blinky is correct: there is insufficent information to analyze the transaction: Does the plan place no limitations on participant-elected investments? Who is the general partner? How many limited partners are there? Can the limited partners control the general partner in any way? What percentage of plan assets is going into the LP? What percentage of the LP will the plan own? Is the investment prudent? Since the investment is real estate, is it diversified? The trustees should get the answers to these questions and any others that may arise when the facts are divulged and get an opinion from their legal counsel before permitting such an investment.
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